A slew of factors are combining to create an uncertain outlook for Q4 alcohol delivery performance, among them the potential for another wave of shutdowns as temperatures cool and people congregate indoors, and different types and sizes of holiday gatherings than in years prior. How can alcohol retailers prepare for what is traditionally the most important sales quarter of the year? BevAlc Insights looked to past Drizly data — both from Q4 of 2019 and from the Covid stocking period (March 15 through April 30) — for guidance. The good news: Shutdown or not, Q4 is likely to be a great opportunity for retailers offering on-demand delivery to drive sales.

A Second Wave of Stock-Up

When early shelter-in-place orders were mandated across the U.S. in mid-March, off-premise alcohol sales — in particular, online alcohol sales — skyrocketed. During the seven-week, Covid-impacted period ending April 18, online sales of alcohol skyrocketed 234 percent year-over-year, according to Nielsen; in April alone, weekly online sales were up between 437 and 477 percent year over year. This was reflected on Drizly, which experienced unprecedented sales and saw its average order size increase by 50 percent year-over-year.

But if new stay-at-home mandates are put into place this fall and winter, will consumers accelerate online alcohol purchasing in the same way that they did during the spring? “100 percent,” says Brian Rosen, the president and founder of BevStrat, an alcohol brand sales and strategy firm. “There’s a visceral response to the word ‘shutdown. And during Q4, there are already more people drinking, so you could arguably have a perfect storm of fear, desperation, holidays, and celebration.”

Some parts of the country have already experienced upticks in “panic buying” as Covid cases surge and new stay-home restrictions are mandated. According to a July 6 report from RBC Capital Markets managing director Nik Modi, “We think that a resurgence in case counts will keep demand elevated for at-home beverage alcohol consumption,” he wrote, “especially as many on-premise venues operate under restricted capacity guidelines or are completely shut down.”

However, Liz Paquette, Drizly’s head of consumer insights, cautions that stock-up behavior is unlikely to reach the heights of March and April. “Much of this mentality early in the pandemic was due to the uncertainty of the situation,” she says. “Now that the public has experience with shutdown procedures and an understanding of what businesses will be deemed essential, including alcohol retailers, the ‘stock up’ could be on a smaller scale.”

Either way, Q4 is likely to see high average order volume, as the quarter is a historically strong sales driver for retailers. Drizly typically sees its greatest average order volume during Q4, and Rosen notes that independent retailers typically sell 20 percent of their annual sales volume in the last six to eight weeks of the year. 

“If another shutdown does not occur,” notes Paquette, “it is possible that average order volume may not exceed the highs seen at the height of Covid pandemic, but will still be up from 2019 averages.”

The Top Sellers Amidst Covid

New shutdowns, along with current Covid-influenced purchasing shifts, could also impact the types of beverages that consumers are gravitating towards. During the Covid stocking period, wine still held the majority of share on Drizly (40.5 percent), but this period was the beginning of liquor’s climb up the sales ladder (38.6 percent). In recent months, liquor has overtaken wine to hold the most share of sales on Drizly, driven by at-home cocktail culture in the wake of on-premise closures.

“For nearly every week since the beginning of March, spirits was the fastest-growing category in off-premise alcohol,” notes Danielle Kosmal, the vice president of beverage alcohol at Nielsen, in a report dated September 2. For the week ending August 22, spirits experienced 26.2 percent year-over-year off-premise sales growth (compared to 17.4 percent for wine and 15.4 percent for beer/FMB/cider). 

Though wine was the top category on Drizly during Q4 of 2019, comprising 41.4 percent of share, retailers should prepare for spirits to be an important sales driver this year. Paquette notes that top-selling spirits sub-categories and products will be solid inventory investments.

Top 5 Liquor Brands on Drizly: Q4 2019

1. Tito’s
2. Bulleit
3. Johnnie Walker
4. Jack Daniel’s
5. Smirnoff

Top 5 Liquor Brands on Drizly: Covid Stocking Period (March 15 – April 30)

1. Tito’s
2. Bulleit
3. Casamigos
4. Jameson
5. Jack Daniel’s

Drizly’s top four best-selling sub-categories from last year’s Q4 — red wine, white wine, vodka, and bourbon — are likely to remain strong through Q4 of 2020, as they topped the list during the Covid stocking period as well. But one sub-category has made serious strides during the pandemic: Silver/blanco tequila, which shot up from the back of the pack to claim fifth spot in top-selling subcategories on Drizly. 

“Tequila is one of the fastest-growing spirits categories in terms of share gains on Drizly over the past few years, and the pandemic further boosted the category growth,” says Paquette. Silver/blanco tequila was the ninth-best seller during Q4 last year, but it is poised to post year-over-year share gains in Q4 of 2020. Retailers should consider allocating more shelf space to tequila SKUs like Casamigos, which entered the top five liquor brands during the Covid stocking period, sitting third behind Tito’s and Bulleit.

Top 10 Sub-Categories on Drizly: Q4 2019

1. Red wine
2. White wine
3. Vodka
4. Bourbon
5. Champagne
6. Scotch whisky
7. Hard seltzer
8. Light lager
9. Silver/Blanco tequila
10. Prosecco

Top 10 Sub-Categories on Drizly: Covid Stocking Period (March 15 – April 30)

1. Red wine
2. White wine
3. Vodka
4. Bourbon
5. Silver/Blanco tequila
6. Scotch whisky
7. Hard seltzer
8. Light lager
9. Rosé wine
10. IPA

While a difficult economic climate could potentially diminish beverage spending — in a Nielsen survey of more than 18,000 consumers this summer, 25 percent of households said they would buy less alcohol if economic conditions get worse — premiumization has been an ongoing trend, particularly within the liquor category, and it has only been accelerated by the pandemic. “Consumers are willing to spend more on spirits as a result of premiumization, coupled with decreased spend for on-premise cocktails,” says Paquette.

Paquette expects that premiumization will remain strong for retailers through the end of the year. “We anticipate that this consumer behavior will persist as celebrations happen at home versus at bars, restaurants, or other on-premise venues,” says Paquette. “There will be a desire to make these occasions feel special, therefore in some cases consumers will look to trade up on alcohol purchases for more premium brands and products.”

A Different Kind of Holiday Season

Holiday occasions, from the celebrations themselves to holiday parties and office gatherings, are typically strong drivers of Q4 alcohol sales, but the 2020 holiday season is likely to look different as travel restrictions and social distancing guidelines remain in place. “Q4 occasions will likely look different than years prior as they are spent at home,” says Paquette, “but we expect them to still drive an end-of-year spike in sales.”

Based on sales spikes on occasions like Cinco de Mayo and the Fourth of July, Paquette expects that consumers will be celebrating during the holidays regardless of additional shutdowns. Those who choose to host small gatherings during the holidays will likely gravitate towards ready-to-drink (RTD) cocktails and canned beverages like hard seltzer, both of which have posted strong share gains during Covid. “If you’re having people in your house, you don’t want to spend 10 minutes making a drink,” says Rosen. “The RTD culture speaks to the desire for products that are safer, easier to produce, easier to throw away, and quicker to consume.”

While consumers may not be gathering as readily compared to Q4 of last year, delivery is sure to play an important role in fourth quarter alcohol purchasing. “From a health perspective, you don’t want to spend an hour in the liquor store anymore,” says BevStrat’s Rosen, adding that many consumers who typically travel over the holidays will be celebrating — and drinking — at home this year.

It’s also likely that more holiday dinners and office parties will be held virtually. “Celebrations will look different for these occasions with restrictions in on-premise and for large gatherings,” says Paquette. “Consumers will look for ways to ‘share’ drinks virtually.”

The result is an anticipated uptick in gifting on Drizly. “Gifting will play a huge role so it is key that retailers create a positive gifting experience by taking top-selling gift items into consideration when making inventory decisions,” says Paquette. “Additionally, we recommend offering gift bags or wrapping and gift notes to create a great experience for both the gift giver and recipient.”

This is supported by the increase in gifting during the Covid stocking period; despite mid-March and April traditionally not being strong gifting periods, orders of gifts on Drizly during this period narrowly outpaced gifting during last year’s holiday season (5.2 percent of orders from March 15 to April 30 versus 5 percent of orders in Q4 of 2019). “Given the growth in gifting during the pandemic period,” says Paquette, “coupled with the typical Q4 increase in gifting, we anticipate the percentage of gifting orders will grow year-over-year in Q4 of 2020 as consumers spend occasions apart from friends and family.”

The expected uptick in gifting could be an opportunity for any retailers who have not been able to move inventory purchased prior to the pandemic. “Bundle different SKUs that are not moving together to create their own gift pack,” says Rosen.

Consumers may also be looking for different price points of gift items on Drizly. While Champagnes like Veuve Clicquot Yellow Label, Dom Perignon, and Moët & Chandon Impérial Brut remained among Drizly’s best-selling gift items during the pandemic stock-up period, value-driven options like Tito’s, La Marca, and Whispering Angel bumped more expensive items off the list.

“During the pandemic stock-up period, we saw a shift among the top 10 gift items to include affordable price point items,” says Paquette, “suggesting an increase in consumers leveraging Drizly for more casual gifting occasions.” Tequilas were also popular gift items during this period, including Casamigos Blanco, Clase Azul Reposado, and Don Julio 1942.

Despite the potential demand for more value-driven gift items, the shift shouldn’t affect retail inventories too much. “Many of these affordable gift items are also top-selling items for non-gift orders,” says Paquette. “For many retailers, this shift may not require them to invest in new products but rather think about increasing shelf space or inventory of these products.”

Top 10 Gift Items on Drizly: Q4 2019

  1. Veuve Clicquot Brut Yellow Label Champagne
  2. Dom Pérignon Vintage Champagne
  3. Don Julio 1942
  4. Moët & Chandon Impérial Brut Champagne
  5. Johnnie Walker Blue Label
  6. Clase Azul Reposado Tequila
  7. Veuve Clicquot Yellow Label Gift Box Champagne
  8. Caymus Napa Valley Cabernet Sauvignon
  9. Hibiki Japanese Harmony Whisky
  10. The Macallan Double Cask 12 Years Old

Top 10 Gift Items on Drizly: Covid Stocking Period (March 15 – April 30)

  1. Veuve Clicquot Brut Yellow Label Champagne
  2. Tito’s Handmade Vodka
  3. La Marca Prosecco
  4. Josh Cellars Cabernet Sauvignon
  5. Casamigos Blanco
  6. Moët & Chandon Impérial Brut Champagne
  7. Whispering Angel Rosé
  8. Dom Pérignon Vintage Champagne
  9. White Claw Hard Seltzer Variety Pack
  10. Don Julio 1942

Like the rest of 2020, Q4 of this year will be unlike any fourth quarter retailers have experienced before. However, it could be a great opportunity for retailers who offer alcohol delivery to drive strong sales. Despite global uncertainty, Paquette doesn’t expect to see popular Q4 sub-categories, like Champagne or Scotch whisky, to experience significant year-over-year decline. “Even with small or virtual celebrations, we anticipate consumers will look for comfort,” she says, “turning to drinks they traditionally associate with these special occasions.”